When in debt, a borrower may deem it best to resolve the situation with debt settlement. This entails negotiating with their creditors to pay back a smaller amount than the full debt outstanding. Many people believe professionals should handle this for them. Can you do it yourself? Yes, but it has limitations and obstacles.
This blog assesses the perks of DIY debt settlement alongside the setbacks so that you can decide whether this is the solution for you.
What is Debt Settlement?
Debt settlement is the process in which a borrower negotiates with a bank or financial institution to pay a lesser amount than what is owed. This usually happens when a borrower finds it hard to make payments due to financial difficulties. The lenders may settle instead of writing off the entire loan.
You may opt either to employ a debt settlement company or to act on your own. By settling the case on your own, you will essentially save a lot of money and time; however, it will also require a huge investment of energy, patience, and some negotiation skills.
Pros of DIY Debt Settlement
1. Saves on Fees
It is expensive to hire a debt settlement company. Most debt settlement companies charge a range of 15-25% of the settled amount. If the debtor settles on his own, he saves that money for directly paying more debt.
2. More Control Over the Process
When negotiating with the lender directly, you drive the whole process. You set the terms, decide on a payment schedule, and set the settlement amount without others getting involved.
3. Faster
Debt settlement companies often juggle multiple cases so yours takes longer to be resolved. Do-it-yourself debt settlement means faster money in your pocket.
4. Talk Directly with Lenders
Some banks would rather deal directly with the borrowers rather than third-party agencies. Kindly sending in your own request can make the lender trust you more, increasing your chances of getting an even sweeter deal in settling.
5. No Scams
Sadly, many debt-settlement companies rip off a poor borrower by charging huge down fees and then producing no results. By settling on your own, you eliminate such a risk.
Cons of DIY Debt Settlement
1. Negotiation Skills Have to be Stars
Banks and lenders have veteran debt collectors on their negotiation side. Without even a little confidence or bargaining skill, you will be losing out to a better offer.
2. Time Consuming
Settling requires a lot of time for negotiation:
You will have to make calls to your lender.
You will probably have to provide them with some financial documents.
OR explain your financial hardship.
AND follow up time and time again.
If you already have a busy schedule with work and personal commitments, this could become stressful.
3. Risk of Rejection
Not all lenders agree to settle a loan. Weak cases may lead lenders to refuse negotiation or only offer very little concession.
4. Detrimental to Your Credit Score
Debt settlement can put a dent on your credit score, hindering your attempts to get loans in the future. This will be true whether you carry out this SBRA procedure on your own or hire someone. Getting an ill-negotiated settlement might have a worse effect on your credit score.
5. Legal Circles
Some loans contain their own legal agreements, to which the fine print may pose a variance. One single erroneous assumption in your settlement request may bring serious answerability or unexpected charges.
How to Settle Your Loan on Your Own
Should you decide to proceed with DIY debt settlement, you should follow the following steps:
Assess Your Financial Situation
Determine how much of a settlement amount you can realistically pay.
Contact The Lender
Call or visit the loan recovery department of your bank and explain your present financial situation.
Make a Settlement Offer
Provide a lower settlement offer anywhere from 40% to 50% of the outstanding amount and negotiate it upwards.
Get It In Writing
Once the lender accepts your settlement amount, confirm it in writing.
Make the Payment and Collect a No-Dues Certificate
Make the payment, and request a No-Dues Certificate to avoid any future claims.
The Bottom Line: Should You Settle the Loan by Yourself?
DIY debt settlement can be just the money-saving and confidence-building option for you; however, it tests your patience and requires some negotiation and legal knowledge. If you think you can confidently carry out negotiations, then it’s worth a shot. On the other hand, if you’re not too sure about the complexities of the negotiations or the law, then getting a professional to assist you would probably be a safer route.
A word of advice: Try to pay off your debts, whether you go the do-it-yourself route or enlist the aid of a professional, in a manner that minimizes any negative effects on your financial future.